Summit surprise: EU clinches revival deal | World News - Hindustan Times
close_game
close_game

Summit surprise: EU clinches revival deal

Reuters | By, Brussels
Jun 30, 2012 12:40 AM IST

Euro zone leaders agreed on Friday to bend their aid rules to shore up banks and bring down the borrowing costs of stricken members like Italy and Spain, in a sign the bloc is adopting a more flexible approach to solving its two-year old debt crisis.

Euro zone leaders agreed on Friday to bend their aid rules to shore up banks and bring down the borrowing costs of stricken members like Italy and Spain, in a sign the bloc is adopting a more flexible approach to solving its two-year old debt crisis.

HT Image
HT Image

The measures, agreed after 14 hours of intense talks that pitted Rome and Madrid against Europe’s paymaster Berlin, were welcomed by financial markets. The euro rose sharply against the dollar and yields on Spanish and Italian debt fell sharply.

Hindustan Times - your fastest source for breaking news! Read now.
Ireland hailed the decisions, which represented a significant shift on Germany’s part, as a "game changer" but many of the details remain to be worked out and leaders appeared

at odds over just how strict the conditions attached to any assistance should be.

“The summit result offers no silver bullet to solve the euro crisis once and for all,” said Holger Schmieding of Berenberg Bank. “It is another attempt to buy some extra time for the underlying fiscal repair and structural reforms to show results. All in all, there is some progress.”

Responding to pleas from Spanish and Italian leaders, who had threatened to block a package of growth measures, the euro zone agreed that its rescue funds could be used to stabilise bond markets without forcing countries that comply with EU budget rules to adopt extra austerity measures or economic reforms.

Crucially, it was also agreed that a single supervisory body for euro zone banks, housed under the ECB, would be created by the end of the year — much faster than previously envisaged.

Once this is operational, the bloc’s future permanent bailout fund, the European Stability Mechanism (ESM), would be able to recaptalise banks directly without increasing a country’s budget deficit, and without preferential seniority status.

The latter concession could help Spain, which formally applied for up to 100 billion euros in assistance this week to recapitalise banks laden with bad debts from a burst housing bubble.

Unlock a world of Benefits with HT! From insightful newsletters to real-time news alerts and a personalized news feed – it's all here, just a click away! - Login Now!

Get Latest World News along with Latest News from India at Hindustan Times.
SHARE THIS ARTICLE ON
Share this article
SHARE
Story Saved
Live Score
OPEN APP
Saved Articles
Following
My Reads
Sign out
New Delhi 0C
Friday, March 29, 2024
Start 14 Days Free Trial Subscribe Now
Follow Us On